DotEcon supports BT in its response to Ofcom’s Business Connectivity Market Review

On 21 September 2015, Ofcom published responses to its Business Connectivity Market Review (BCMR).  In its consultation, Ofcom proposed to change its product market definition, dropping previous bandwidth distinctions due to a new finding that there are chains of substitution, and to impose passive remedies (in particular, access to dark fibre) alongside existing active remedies.

A report prepared by DotEcon considering the approach taken by Ofcom was submitted alongside BT’s response.  It argues that there are substantial risks from introducing passive remedies alongside actives and that Ofcom’s pricing approach for passive remedies does not eliminate these risks as claimed.  It also notes the lack of a transparent framework within the review to assess the trade-off of costs and benefits.

The report expresses concerns that Ofcom has not provided sufficient evidence to justify a single product market (combining TISBO and MISBO services into a single CISBO market) and highlights European case precedence where the Commission has required further evidence to support such findings.  Furthermore, Ofcom’s approach to market definition does not fully account for the interaction between product characteristics and geographic locations, which leads to a number of cumulating biases against identifying competition in the provision of higher bandwidth services.  Overall, the report finds that Ofcom’s approach to market definition provides an unreliable view of the extent of competition in the market and that the decision to impose dark fibre remedies is not well substantiated.

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